October 2012 Archives

In Dudenhoefer v. Fifth Third Bancorp, No. 11-3012 (6th Cir. 2012), the plaintiffs were appealing the dismissal of their case by the district court. The plaintiffs are former employees of defendant Fifth Third Bank (the "Bank"), and were participants in the Fifth Third Bancorp Master Profit Sharing Plan ("the Plan"). The Plan is a defined contribution retirement plan, for which the Bank serves as trustee. Participants could direct their account balances in the Plan among various options, including a fund holding Bank common stock ("Bank Stock Fund"). The Bank chose to incorporate by reference the Bank's SEC filings into the Plan's Summary Plan Description (the "SPD").

The plaintiffs allege that the Bank switched from being a conservative lender to a subprime lender, that its loan portfolio became increasingly at risk due to defaults, and that it either failed to disclose the resulting damage to the company and its stock or provided misleading disclosures. The price of the Bank's common stock declined 74% during the period covered by the suit, July 19, 2007 through September 18, 2009, causing the Bank Stock Fund and thus the Plan to lose tens of millions of dollars. The plaintiffs said that the Bank breached its ERISA fiduciary duties by continuing to offer and failing to divest the Plan of Bank stock (the "prudence claim"), and by failing to provide complete and accurate information about Bank stock (the "disclosure claim").

The Sixth Circuit Court of Appeals (the "Court") concluded that the plaintiffs had stated a claim of breach of fiduciary duty with respect to the prudence claim. It said that the complaint alleges facts indicating that an adequate (or even cursory) investigation would have revealed to a reasonable fiduciary that investment by the Plan in Bank stock was clearly imprudent. A prudent fiduciary acting under similar circumstances would have acted to protect participants against unnecessary losses, and would have made different investment decisions. The Court noted that the Sixth Circuit has adopted the Kuper/Moench presumption that the Bank acted prudently when keeping the Plan invested in Bank stock, but said that this presumption does not apply at the notice to dismiss stage-where the case stood at this point.

As to the disclosure claim, the Court said that a failure to disclose is a breach of the ERISA duty of loyalty. A fiduciary breaches this duty by making material misrepresentations or by failing to inform when the fiduciary knows that silence might be harmful. The threshold question is whether the Bank was acting as a fiduciary when it was making misrepresentations or was silent. Here, the Bank was acting as a fiduciary when incorporating the SEC filings into the SPD by reference. An SPD, a document ERISA requires to be sent to plan participants to provide specified information about the plan, is unquestionably a fiduciary communication. The Bank chose to provide Plan participants with selected information--alleged to include misrepresentations about the Bank and its stock--by incorporating only specifically enumerated SEC filings and specific future filings into the SPD. Thus, the incorporation is a fiduciary action and communication. The Court concluded that the complaint states a claim of breach of fiduciary duty with respect to the disclosure clam, as it alleges that the Bank intentionally incorporated the Bank's SEC filings into the Plan's SPD-a fiduciary action- and thereby conveyed misleading information to Plan participants-a possible breach of the duty of loyalty.

Since the Court concluded that the plaintiffs' complaint states claims for breaches of fiduciary duty, the Court overturned the district court's dismissal of the case, and remanded the case back to the district court for further proceedings.

In Abshire v. Redland Energy Services, LLC , No. 11-3380 (8th Cir. 2012), the plaintiffs were five current and former employees of Redland Energy Services, LLC ("Redland"). The plaintiffs had brought this suit, alleging that Redland violated the FLSA's overtime pay requirements by changing the designation of their workweek, but not their work schedule, so that fewer hours qualified as "overtime." In this case, Redland had changed the plaintiff's designated workweek from a Tuesday-to-Monday workweek to a Sunday-to-Saturday workweek, and the change resulted in fewer overtime hours for the plaintiffs. The district court granted summary judgment for Redland, and the plaintiffs appealed.

In analyzing the case, the Eighth Circuit Court of Appeals (the "Court") said that under the FLSA's "maximum hours" provision, found in 29 U.S.C. § 207(a)(1), the unit of time within which to distinguish regular from overtime work is the week. The statute does not define workweek. The Department of Labor's (the "DOL's") regulations state that the workweek is a fixed regularly recurring period of 168 hours -- seven consecutive 24-hour periods. It need not coincide with the calendar week but may begin on any day and at any hour of the day. Once the beginning time of an employee's workweek is established, it remains fixed regardless of the schedule of hours worked by him. See 29 C.F.R. § 778.105. Consistent with the plain language of this regulation, an employer does not violate the FLSA merely because, under a consistently-designated workweek, its employees earn fewer hours of overtime than they would if the workweek was more favorably aligned with their work schedules.

The Court therefore concluded that the FLSA does not prescribe how an employer must initially establish its "workweek" for overtime purposes. But can the workweek be changed after it has initially been established? The DOL's regulations allow the change, if the change is permanent and is not designed to evade the FLSA's overtime requirements. Again, see 29 C.F.R. § 778.105. The Court said that, as indicated above, the FLSA does not require a workweek schedule that maximizes an employee's accumulation of overtime pay. Thus, a change to a schedule that provides less overtime pay-even if the change is intended to result in less overtime pay- should not be treated as having been designed to evade the FLSA's overtime requirements, so long as (as in the instant case) the change is permanent and otherwise made in accordance with FLSA rules. As such, the Court concluded that the change in designation of the plaintiffs' workweek by Redland did not violate the FLSA, and it affirmed the district court's summary judgment for Redland.

According to the website of the Social Security Administration, the Social Security taxable wage base, often referred to as the Social Security "contribution and benefit base", has been increased from to $110,100 to $113,700 for 2013.

The Social Security contribution and benefit base is important because, among other things, it provides a limitation on the amount of wages that may be taken into account each year for purposes of applying Social Security's Old-Age, Survivors, and Disability Insurance ("OASDI") taxation. The website states that the OASDI tax rate for wages paid in 2013 is set by statute at 6.2 percent for employees and employers, each. Thus, an individual with wages equal to or larger than $113,700 would pay $7,049.40 in OASDI taxes in 2013, and his or her employer would pay the same amount. The OASDI tax rate for self-employment income in 2013 is 12.4 percent.

In IR-2012-77, the Internal Revenue Service ("IRS") announced the cost-of-living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2013. The IRS said that, in general, many-but not all- of the pension plan limitations will change for 2013, since the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment. Some highlights:

--The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan is generally increased from $17,000 to $17,500.

--The catch-up contribution limit for employees aged 50 and over who participate
in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan generally remains unchanged at $5,500.

--Effective January 1, 2013, the limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) of the Code is increased from $200,000 to $205,000.

--The limitation for defined contribution plans under Section 415(c)(1)(A) of the Code is increased in 2013 from $50,000 to $51,000.

--The annual compensation limit under Sections 401(a)(17) of the Code is increased from $250,000 to $255,000.

In Acevedo-Parrilla v. Norvatis Ex-Lax, Inc., No. 10-2276 (1st Cir. 2012), the plaintiff, Hernán Acevedo-Parrilla ("Acevedo"), was appealing the district court's award of summary judgment to his former employer, Norvatis Ex-Lax, Inc. ( "the Company"), on his claims that his job was terminated due to age discrimination in violation of the Age Discrimination in Employment Act (the "ADEA").

In analyzing the case, the First Circuit Court of Appeals (the "Court") said that, to establish the occurrence of age discrimination in violation of the ADEA, under the McDonnell Douglas framework used for such purposes: (1) the plaintiff must make out a prima facie case of the violation, (2) if the plaintiff succeeds, the employer then has the burden of producing a legitimate, non-discriminatory reason for the job termination, and (3) if the employer succeeds, the plaintiff then must prove by a preponderance of the evidence that the employer's alleged nondiscriminatory reason was in fact a pretext for discrimination. Here, the Court found that the case got by (1) and (2). But what about (3)?

The Court said that, for a plaintiff to avoid summary judgment at stage (3), he must have provided minimally sufficient evidence that the termination of his employment was motivated by age discrimination. The Court found that the record contains sufficient evidence from which a jury could conclude that the Company's reason for terminating Acevedo was pretextual, and that the true reason for his termination was discrimination based on his age. In reaching this conclusion, the Court pointed to: (a) inconsistencies between the Company's stated reasons for terminating Acevedo and Acevedo's performance record at the Company, (b) a lack of credibility that may be ascribed by a jury to certain of the Company's justifications for dismissal, and, most importantly to the Court, (c) the fact that in response to arguably similar conduct by Acevedo's younger replacement, the Company took no disciplinary action. Accordingly, the Court reversed the district court's grant of summary judgment, and remanded the case back to the district court.

Election Day is almost here (it is Tuesday, Nov. 6). NYS Election Law (section 3-110(1) to (4)) has several requirements that employers and employees must follow so that employees can take time off to vote. Here what the law says:

1) An employer must post a notice about the rules for taking time off. This notice must be posted at least 10 days in advance of Election Day (that is, by Tuesday, October 23). The link for a sample notice, made available by the New York State Board of Elections, is here. The notice must be posted in the place of work where it can be seen as employees come or go to their place of work, and must remain posted until the close of the polls on Election Day (9:00pm).

2) If an employee does not have sufficient time to vote outside of his or her working hours, then the employee may take enough time off , up to two hours without loss of pay, so that-when added to the non-work voting time he or she has otherwise- the employee will have sufficient time to vote.

3) If an employee has four consecutive hours either between the opening of the polls (6:00 am) and the beginning of his or her working shift, or between the end of his or her working shift and the closing of the polls (9:00pm), then the employee is deemed to have sufficient time outside of his or her working hours to vote, for purposes of requirement (2.)

4) If the employee is permitted to take time off to vote under (2), the time off need not be allowed other than at the beginning or end of his or her working shift, as the employer may
designate, or as the employee and employer otherwise mutually agree.

5) An employee who requires working time off to vote must notify his or her employer not more than ten, nor less than two, working days before the Election Day (that is, here, between October 23 and November 2 inclusive) of his or her requirement.

In this case, Kallail had worked for Alliant as a Resource Coordinator. Kallail has Type I diabetes. The diabetes made it difficult for Kallail to work as a Resource Coordinator. This resulted because Resource Coordinators had to work rotating shifts, in which they worked in teams of two on nine-week schedules that rotate between twelve-hour and eight-hour shifts, and day and night shifts. These shifts had an adverse effect on Kallail's diabetes, since working the shifts resulted in the vacillation of Kallail's blood pressure and blood sugar. Kallail requested that she be allowed to work a straight shift, as an accommodation for her disease, but Alliant turned down the request. Kallail eventually brought this suit, alleging that Alliant had discriminated against her based on disability, in violation of the ADA, by failing to provide her with a reasonable accommodation.

In analyzing the case, the Eighth Circuit Court of Appeals (the "Court") stated that the ADA issue here is whether Kallail was able to perform the essential functions of her job, with or without reasonable accommodation. First, the Court concluded that the rotating shift was an essential function of the Resource Coordinator position, since it: (1) was listed as a requirement on Alliant's job description for the position, (2) provided enhanced experience and training for the position, and (3) benefitted Alliant by spreading the less desirable shifts around to all persons serving as a Resource Coordinator. Next, the Court concluded that, in this case, Kallail could not perform the essential functions of the Resource Coordinator position, including the rotating shifts, even with a reasonable accommodation. Kallail had conceded that she could not perform those essential functions-when the rotating shifts are included- without reasonable accommodation due to her diabetes, and she could not otherwise identify any reasonable accommodation available to her. For example, an employer is not required to eliminate an essential job function-such as the rotating shifts-in order to create a reasonable accommodation. As such, the Court ruled that Kallail's claim of discrimination against Alliant fails, and it upheld the district court's summary judgment in Alliant's favor.

In Donnelly v. Greenburgh Central School District No. 7, Docket No. 11-2448-cv (2nd Cir. 2012), one of the issues faced by the Second Circuit Court of Appeals (the "Court") was whether the plaintiff, Edward Donnelly ("Donnelly"), had been eligible to take leave under the Family Medical Leave Act (the "FMLA"). The defendants argued that Donnelly was not so entitled, because, as calculated under his union's Collective Bargaining Agreement (the "CBA"), he had worked only 1,247 hours -- three fewer than the statutory minimum of 1250 -- in the preceding year, The question then, for the Court, is how the hours should be counted in Donnelly's case.

In analyzing the case, the Court noted that, to be eligible for FMLA leave, an employee must work at least 1,250 hours of service during the previous 12-month period. During the applicable period in this case, Donnelly, a teacher, had worked 172 of the expected 189 days of the school year. The CBA set forth a formula for calculating the number of hours that would be credited to a teacher. Under this formula, the teacher is generally credited with 7.25 hours per day, giving Donnelly 1247 hours. However, Donnelly asserted that he and most teachers regularly work in excess of a total of one hour before and after class, and that he typically worked a total of 1.5 hours before and after class every day. That extra 1.5 hours per day, if taken in account, would be in addition to the 7.25 hours credited under the CBA, and would put Donnelly well over the 1250 hour threshold for the applicable period.

The Court further noted that, as to the number of Donnelly's hours for determining FMLA leave entitled, the DOL regulations state that, in the event an employer does not maintain an accurate record of hours worked by an employee, the employer has the burden of showing that the employee has not worked the requisite hours. In fact, the regulations specifically state that an employer must be able to clearly demonstrate that full-time teachers of an elementary or secondary school system-like Donnelly- did not work 1,250 hours during the previous 12 months in order to claim that the teachers are not eligible for FMLA leave. (29 C.F.R. § 825.110(c)(3)). The DOL regulations say further that the determining factor is the number of hours an employee has worked for the employer within the meaning of the FLSA. The determination is not limited by methods of recordkeeping, or by compensation agreements that do not accurately reflect all of the hours an employee has worked for or been in service to the employer. Any accurate accounting of actual hours worked under FLSA's principles may be used (29 C.F.R. § 825.110(c)(1)).

The Court found that the defendants did not keep records of the hours that Donnelly worked, so they have the burden of proving his ineligibility for FMLA leave by reason of failing to work the 1250 hours. Further, based on the DOL regulations, the CBA and its formula do not control in counting the hours. The actual hours worked must be determined. The Court remanded the case back to the district court to make this determination.

In Access Mediquip L.L.C. v. United Health Care Insurance Company, No. 10-20868 (5th Cir. 2012), questions were raised as to the scope of liability of an ERISA plan administrator and fiduciary (the defendants) for allegedly misrepresenting to a service provider (the plaintiff) that a plan beneficiary's purchase of medical devices from the provider would be reimbursed by the plan. One issue arising out of these questions was whether the service provider's state law claims for negligent misrepresentation, promissory estoppel and violations of the Texas Insurance Code were preempted by ERISA. Overriding some previous Fifth Circuit cases, and getting by some of the case's procedural events, the Court ruled that those state law claims were not preempted by ERISA.

In this case, a collective bargaining agreement a ("CBA") governed the relationship between Acument and its retired employees. The CBA contained an express provision under which Acument reserved the right to modify or terminate the retiree healthcare benefits. Specifically, the provision stated that "The Company reserves the right to amend, modify, suspend, or terminate the Plan." Such a provision is commonly referred to as a "Reservation of Rights" or "ROR" clause. Since the CBA had an ROR clause, the Court concluded that the CBA does not promise lifetime, unalterable retiree healthcare and life insurance benefits, and therefore Acument could change or terminate those benefits at will.

In Robert v. Board of County Commissioners of Brown County, Kansas, No. 11-3092 (10th Cir. 2012), the plaintiff, Catherine Robert ("Robert"), had worked as supervisor of released adult offenders for ten years when she developed sacroiliac joint dysfunction. After a lengthy leave of absence, including the period authorized by the Family and Medical Leave Act ("FMLA"), Robert remained unable to perform all of her required duties, and she was terminated. The Tenth Circuit Court of Appeals (the "Court") held (among other things) that Robert's termination did not constitute discrimination in violation of the Americans with Disabilities Act (the "ADA").

One issue in the case was whether Robert could perform the essential functions of her job with reasonable accommodation, an element of a prima facie case of discrimination under the ADA. The Court said, on this issue, that the only potential accommodation would be a temporary reprieve from the job's essential functions. A brief leave of absence for medical treatment or recovery can be a reasonable accommodation. However, there are two limits on the bounds of reasonableness for a leave of absence. First, the employee must provide the employer an estimated date when she can resume her essential duties. The second is durational. A leave request must assure an employer that an employee can perform the essential functions of her position in the "near future." For example, a six-month leave request is too long to be a reasonable accommodation. Here, Robert failed to provide an estimated return date, and any further absence following six months of absence-likely to occur here- would be unreasonable as a matter of law. Consequently, Robert failed to meet both limits. As such, the Court concluded that-in this case- a leave of absence is not a reasonable accommodation, and therefore Robert cannot perform the essential job functions with any reasonable accommodation.

In Lewis v. Humboldt Acquisition Corp., No. 09-6381 (6th Cir. 2012), the Sixth Circuit adopted the "but for" standard that plaintiffs must meet to prove claims under the Americans with Disabilities Act (the "ADA"). The Court said that the ADA bars discrimination "because of" an employee's disability, meaning that the ADA prohibits discrimination that is a "but-for" cause of an adverse employment decision. The Sixth Circuit will apply this standard, in lieu of the "sole cause" standard that the Sixth Circuit had used for ADA claims at least since 1995 (see Maddox v. University of Tennessee (6th Cir. 1995)). According to the Court, no other circuit uses the "sole cause" standard. The Court also rejected a "motivating factor" standard.

The "but for" standard-as opposed to the "sole cause" standard- should help plaintiffs succeed in their ADA cases.

In Reese v. CNH America LLC, Nos. 11-1359, 11-1857, 11-1969 (6th Cir. 2012), the Sixth Circuit Court of Appeals (the "Court") faced an unusual situation. Three years ago, the Court had remanded this dispute to the district court for fact finding necessary to determine whether CNH America's proposed modifications to its retiree healthcare benefits are reasonable. However, the district court did not reach the reasonableness question, and did not create a factual record that would permit the Court to answer the question on its own. As a result, the Court remanded the case back to the district court for further proceedings.

In its earlier opinion, the Court had considered two questions: did CNH in a 1998 collective bargaining agreement ( the "CBA") agree to provide healthcare benefits to retirees and their spouses for life? And, if so, does the scope of this promise permit CNH to alter these benefits in the future? In answering the first question, the Court had determined that the CBA did not allow the company to terminate the benefits since eligibility for lifetime healthcare benefits had vested. As to the second question, the Court had determined that the scope of the vesting commitment in the context of healthcare benefits, as opposed to pension benefits, did not mean that CNH could make no changes to the healthcare benefits provided to retirees. The parties to the CBA had to contemplate change. To illustrate, the 1998 CBA itself modified retiree healthcare to increase a retiree's payment for using an out-of-plan doctor. The Court had concluded, as to the second question, that CNH could make reasonable change to the retiree healthcare benefits.

But what changes are "reasonable"? The Court had listed, in its earlier opinion, three considerations: Does the modified plan provide benefits "reasonably commensurate" with the old plan? Are the proposed changes "reasonable in light of changes in health care"? And are the benefits "roughly consistent with the kinds of benefits provided to current employees"? It then remanded the case to the district court to take evidence and to decide whether CNH's proposed modifications were reasonable. As said above, the district court never made this decision.

This time, in remanding the case back to the district court, the Court said that the district court should weigh the above three considerations, and added that the district court should take evidence on at least the following questions:

• What is the average annual total out-of-pocket cost to retirees for their healthcare under the old plan (i.e., the pre-modified plan)? What is the equivalent figure for the new plan (i.e., the modified plan)?
• What is the average per-beneficiary cost to CNH under the old plan? What is the equivalent figure for the new plan?
• What premiums, deductibles and copayments must retirees pay under the old plan? What about under the new plan?
• What difference (if any) is there between the quality of care available under the old and new plans?
• What difference (if any) is there between the new plan and the plans CNH makes available to current employees and people retiring today?
• How does the new plan compare to plans available to retirees and workers at companies similar to CNH and with demographically similar employees?

In Kroll v. White Lake Ambulance Authority, No. 10-2348 (6th Cir. 2012), the plaintiff, Emily Kroll ("Kroll"), was appealing the district court's grant of summary judgment to her former employer, defendant White Lake Ambulance Authority ("WLAA"), on her claims under the Americans with Disabilities Act (the "ADA"). The primary issue on appeal was whether the counseling program WLAA ordered Kroll to attend is a "medical examination" under the ADA (specifically, under 42 U.S.C. § 12112(d)(4)(A)).

In this case, Kroll was working for WLAA as an Emergency Medical Technician (an "EMT"). She was considered a good employee. However, after Kroll became romantically involved with one of her co-workers at WLAA, she began to exhibit erratic behavior. The WLAA required Kroll to receive psychological counseling. Kroll did not agree to receive the counseling, since she would have to pay for it with her own funds, and instead she left her position at WLAA. Ultimately, Kroll filed this suit claiming, among other things, that WLAA violated the ADA by requiring her to receive psychological counseling, a type of medical examination.

In analyzing the case, the Sixth Circuit Court of Appeals (the "Court") noted that, under the ADA (again, in Title 42 U.S.C. § 12112(d)(4)(A)) an employer is prohibited from requiring a medical examination, or making inquiries of an employee as to whether an employee is an individual with a disability, unless the examination or inquiry is shown to be job-related and consistent with business necessity, or unless another exception applies. But is psychological counseling a "medical examination" to which the foregoing prohibition applies? To make this determination, the Court reviewed the EEOC's Enforcement Guidance: Disability-Related Inquiries and Medical Examinations of Employees Under the Americans with Disabilities Act . This guidance defines "medical examination" as "a procedure or test that seeks information about an individual's physical or mental impairments or health." It provides the following seven factors for analyzing whether a test or procedure qualifies as a "medical examination" and notes that "one factor may be enough to determine that a test or procedure is medical":

(1) whether the test is administered by a health care professional;
(2) whether the test is interpreted by a health care professional;
(3) whether the test is designed to reveal an impairment or physical or mental health;
(4) whether the test is invasive;
(5) whether the test measures an employee's performance of a task or measures his/her physiological responses to performing the task;
(6) whether the test normally is given in a medical setting; and,
(7) whether medical equipment is used.

Based on the evidence presented by Kroll, factors (1), (2) and (3) are answered in the affirmative. The Court found that a reasonable jury could find that these factors, so answered, weigh in favor of concluding that the psychological counseling Kroll was required to attend constituted a "medical examination." The Court reached this conclusion, in particular, because the psychological counseling in question was likely to probe and explore whether Kroll suffered from a mental-health disability, regardless of whether this was WLAA's intention. An analysis of the remaining factors is not needed. As such, the Court ruled that the psychological counseling in question is a medical examination. Accordingly, the Court vacated the district court's summary judgment, and remanded the case back to the district court to determine if an exception to the medical examination prohibition applies in this case.

The Department of Labor's Office of Inspector General/Office of Audit has completed a study and issued a report on ERISA's plan audit process. Here is a summary of what the report said:

Background. ERISA is the primary federal law governing private sector employee benefit plans. ERISA requires that most large employee benefit plans use an independent qualified public accountant to audit the plan's financial statements in accordance with "Generally Accepted Auditing Standards". The Department of Labor's Employee Benefits Security Administration (the "EBSA") has the responsibility to ensure these audits meet ERISA requirements. One problem is that ERISA allows limited scope audits, which means the auditor does not need to audit plan asset information if the assets are held and certified by certain financial institutions. Since the auditor does not test asset information certified by the financial institution, the auditor disclaims an opinion on the plan's financial
statements, providing no assurances to participants or beneficiaries on the reliability of the plan's financial statements.

What the Study Found. Despite EBSA's significant efforts to improve oversight and quality of the ERISA plan audit process, protections and assurances have decreased over time for participants and beneficiaries. EBSA's improvement efforts have included working with the AICPA to establish an audit quality center that provides guidance and education, redesigning its targeting methods to identify and correct substandard plan audits, and providing training and outreach activities
for plan auditors. However, these efforts have been offset by plan administrators' increased use of the limited scope audits and a significant growth in asset value of
plans subjected to limited scope audits. The percentage of plans electing limited scope audits has grown from about 46 percent in 1987 to approximately 70 percent in 2010. The reported value of assets excluded from plan audits has similarly grown from about $520 billion (43percent) in 1989 to $3.3 trillion (58 percent) in 2010.

Recommendations. The Report recommends that the EBSA seek repeal of the limited scope audit exemption and obtain authority over plan auditors. It also recommends that, in the interim, the EBSA: (1) use existing authority to clarify and strengthen limited scope audit regulations and evaluate recommendations of the ERISA Council, (2) make better use of available enforcement tools over the accountants auditing the plans, (3) improve procedures in audit quality reviews, and (4) perform a reassessment of audit quality.

EBSA Response. The EBSA's response to the report is found in the report's Appendix D.

In Testa v. Hartford Life Insurance Company, No. 11-974-cv (2nd Cir. 2012) (Summary Order), the plaintiff, Josphine Testa ("Testa"), was a participant in several employer-provided health care plans (the "Plans"). The Plans were governed by ERISA, and were administered by the defendant, Hartford Life Insurance Company ("Hartford"). Testa brought suit against Hartford , as plan administrator, for denying her claim under the Plans for long term disability ("LTD") benefits. The district court granted summary judgment to Hartford, and Testa appealed. On the appeal, Testa argued that Hartford's denial of the claim was not supported by substantial evidence, and Hartford failed to provide her a full and fair review of her claim as required by ERISA.

In analyzing the case, the Second Circuit Court of Appeals (the "Court") said that where, as here, written plan documents confer upon a plan administrator the discretionary authority to determine eligibility, the Court will not disturb the administrator's claim denial unless it is arbitrary and capricious. Under the arbitrary and capricious standard, a decision to deny benefits will be overturned only if it is without reason, unsupported by substantial evidence or erroneous as a matter of law. Here, Hartford's decision to deny the claim for LTD benefits was reasonable and supported by substantial evidence, and thus not arbitrary or capricious. Hartford relied on the opinions of three independent physicians and one independent psychologist, all of whom reviewed Testa's medical record and independently determined that there was insufficient evidence to support a finding of total disability. Specifically, those doctors found--and the record on appeal demonstrates--virtually all of Testa's symptoms were self-reported and supported by little, if any, objectively verifiable evidence. Moreover, that Hartford chose to credit the independent doctors it selected over Testa's treating physicians is not, in and of itself, grounds for reversing its decision.

The Court noted that Testa also contended that several procedural irregularities evidence that Hartford failed to provide a "full and fair review" of her claim as required by ERISA (See 29 U.S.C. § 1133(2)). After reviewing the record, the Court found that these contentions had no merit. As such, the Court affirmed the district court's summary judgment in Hartford's favor.

The Internal Revenue Service (the "IRS") has issued Notice 2012-63, which contains special per diem rates for employees to use in substantiating the amount of ordinary and necessary business expenses incurred while traveling away from home. Specifically, the Notice includes: (1) the special transportation industry meal and incidental expenses ("M&IE") rates, (2) the rate for the incidental expenses only deduction, and (3) the rates and list of high-cost localities for purposes of the high-low substantiation method. The Notice is here (BenefitLink.com). The rates generally apply to expenses incurred during travels on and after October 1.

In George v. Junior Achievement of Central Indiana, Inc., No. 11-3291 (7th Cir. 2012), the plaintiff, Victor George ("George"), a vice president of Junior Achievement of Central Indiana, Inc. ("Junior Achievement"), discovered that money withheld from his pay by Junior Achievement was not being deposited by it into George's retirement account and health savings account. After complaining to Junior Achievement's accountants, executives and board, and repeatedly asking how the situation would be rectified, George received checks for about $2,600 to make up for the missed deposits plus interest. George's employment with Junior Achievement was terminated as of December 1, 2009, after he withdrew sums from the retirement account, even though was entitled to do so. One question for the Seventh Circuit Court of Appeals (the "Court"): was George protected against termination by the anti-retaliation provision in section 510 of ERISA?

In analyzing the case, the Court noted that an employer's failure to deposit money withheld from an employee's paycheck into that employee's retirement account is a breach of the employer's duties as a fiduciary under ERISA. George protested his employer's violation of that duty, and maintains that the protests led to his firing. Section 510 of ERISA prohibits retaliation "against any person because he has given information or has testified or is about to testify in any inquiry or proceeding relating to ERISA." The issue becomes whether George's protests are protected under section 510. After reviewing section 510, the Court concluded that section 510 should be divided into two spheres: the informal sphere of giving information in or in response to inquiries, and the formal sphere of testifying in proceedings.

The Court then said that George comes under the first sphere. George had notified Junior Achievement of the potential breach of its fiduciary duties and asked (repeatedly) what would be done to remedy the situation. Those conversations involved an informal giving "information" in an "inquiry". This obtains particularly since Junior Achievement responded to the conversations rather than ignoring them. (If it had ignored them, the conversations could not have caused the discharge.) Therefore, George's complaints could be protected by section 510. Having provided this guidance, the Court remanded the case back to the district court to determine if George's termination was actually in retaliation for his complaints-and therefore in violation of section 510- or for some other reason.

The summary of benefits and coverage, which we have been calling an "SBC", and which group health care plans have to provide to participants and beneficiaries, is becoming (or may already be) due. For participants and beneficiaries who enroll or re-enroll in the plan through an open enrollment period (including late enrollees and re-enrollees), the SBC must initially be provided beginning on the first day of the first open enrollment period that begins on or after September 23, 2012. For participants and beneficiaries who enroll in coverage other than through an open enrollment period (including individuals who are newly eligible for coverage and special enrollees), the SBC must initially be provided beginning on the first day of the first plan year that begins on or after September 23, 2012. The penalties for not providing a compliant SBC are severe.

To help those responsible for furnishing the SBCs, I have prepared an article on the SBC requirements. Feel free to contact me through the blog if you would like the article or if you have any questions-Stanley

In Advisory Opinion 2012-06A, the U.S. Department of Labor (the "DOL") faced the question of whether the Hawaii Laborers' and Employers' Cooperation and Education Trust Fund (the "Fund") is an employee welfare benefit plan ("a welfare benefits plan") within the meaning of section 3(1) of Title I of ERISA. The Fund was established and is operated as a labor management cooperation committee under section 302(c)(9) of the LMRA.

After reviewing the information and representations provided by the Fund, the DOL concluded that the Fund is not a welfare benefits plan. The Advisory Opinion stated that the language in section 3(1) indicates that, to be a welfare benefits plan, the Fund would have to "provide" benefits to "participants or their beneficiaries" and these benefits must be payable upon a particular occurrence. Here, the only benefits which can be said to be provided by the Fund's activities accrue generally to the construction industry in Hawaii and participating employers and their covered bargaining unit employees as a whole, rather than to individual participants or beneficiaries. The DOL has concluded that generalized industry and workplace improvements of the sort that may be generated by the activities of a labor management cooperation committee-such as the Fund- are not "benefits" covered by section 3(1) of ERISA.

In Notice 2012-46, the Internal Revenue Service (the "IRS") has provided guidance, in the form of Q & As, on the notice requirements of section 101(j) of ERISA. Under these requirements, notice must be provided to participants and beneficiaries in a single-employer defined benefit pension plan (a "Plan") regarding certain limitations on benefits imposed under section 206(g) of ERISA.

By way of background, section 101(j) of ERISA requires the plan administrator of a Plan to provide a written notice to participants and beneficiaries generally within 30 days after the plan becomes subject to the benefit limitations of section 206(g)(1) or (3) of ERISA (relating to unpredictable contingent event benefits and prohibited payments). In addition, if a Plan becomes subject to the benefit limitations of section 206(g)(4) of ERISA (relating to the cessation of benefit accruals), the section 101(j) notice must be provided within 30 days after the earlier of the valuation date for the plan year for which the Plan's adjusted funding target attainment percentage (the "AFTAP") is less than 60% or the date such percentage is presumed to be less than 60% under the rules of section 206(g)(7) of ERISA.

The Q &As in Notice 2012-46 cover a number of issues pertaining to the section 101(j) notice, including:

--the timing requirements for providing the notice;

--how the requirements for the notice interact with the notice requirements of section 204(h) of ERISA;

In Pagan-Colon v. Walgreens of San Patricio, Inc., Nos. 11-1089/11-1091 (1st Cir. 2012), the First Circuit Court of Appeals (the "Court") faced, among other things, a claim that the plaintiff had been terminated in retaliation for conduct protected by the Family and Medical Leave Act (the "FMLA"). One issue arising out of that claim is whether a backpay award under the FMLA may include overtime pay.

The district court had determined that the plaintiff's lost wages-due to retaliation which violated the FMLA-included $20,637 in overtime pay. The district court determined the amount of the overtime pay owed the plaintiff by estimating that he would have worked 6.5 hours of overtime per week over the 125-week period between his employment termination and the judgment. It obtained the 6.5 hours per week figure by looking at the year-to-date average of the plaintiff's weekly hours during the months prior to his termination.

The Court ruled that overtime pay may be included in backpay damages for retaliation under the FMLA. Further, the Court ruled that the district court did not commit a clear error in the manner in which it calculated the amount of the overtime pay for these purposes. Consequently, the Court upheld the district court's calculation.